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Working Papers by andreas hornstein

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Notes on the Inflation Dynamics of the New Keynesian Phillips Curve
By Andreas Hornstein
Working Paper 07-4
Released: August 2007

These notes contain the derivations for results stated without proof in Hornstein (2007). First, I derive the log-linear approximation of the inflation dynamics in the Calvo-model with elements of backward-looking pricing when the approximation takes...

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Technology-Policy Interaction in Frictional Labor Markets
By Andreas Hornstein, Per Krusell & Giovanni L. Violante
Working Paper 06-10
Released: November 2006

Does capital-embodied technological change play an important role in shaping labor market outcomes? To address this question, we develop a model with vintage capital and search-matching frictions where irreversible investment in new vintages of capital...

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Technical Appendix for "Frictional Wage Dispersion in Search Models: A Quantitative Assessment"
By Andreas Hornstein, Per Krusell & Giovanni L. Violante
Working Paper 06-8
Released: September 2006

In this Technical Appendix to Hornstein, Krusell, and Violante (2006) (HKV, 2006, hereafter) we provide a detailed characterization of the search model with (1) wage shocks during employment and (2) on-the-job search outlined in Sections 6 and 7 of...

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Frictional Wage Dispersion in Search Models: A Quantitative Assessment
By Andreas Hornstein, Per Krusell & Giovanni L. Violante
Working Paper 06-7
Released: September 2006

Standard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a small amount of frictional wage dispersion, i.e., wage di erentials among ex-ante similar workers induced purely by search frictions. We derive...

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Understanding How Employment Responds to Productivity Shocks in a Model with Inventories
By Yongsung Chang, Andreas Hornstein & Pierre-Daniel G. Sarte
Working Paper 06-6
Released: August 2006

Whether technological progress raises or lowers aggregate employment in the short run has been the subject of much debate in recent years. Using a simple model of industry employment, we show that cross-industry differences of inventory holding costs,...

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Home Production
By Yongsung Chang & Andreas Hornstein
Working Paper 06-4
Released: June 2006

Studying the incentives and constraints in the non-market sector — that is, home production — enhances our understanding of economic behavior in the market. In particular, it helps us to understand (1) small variations of labor supply over ...

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The Replacement Problem in Frictional Economies: A Near-Equivalence Result
By Andreas Hornstein, Per Krusell & Giovanni L. Violante
Working Paper 05-1
Released: April 2005

We examine how technological change affects wage inequality and unemployment in a calibrated model of matching frictions in the labor market. We distinguish between two polar cases studied in the literature: a "creative destruction" economy...

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Productivity, Employment, and Inventories
By Yongsung Chang, Andreas Hornstein & Pierre-Daniel G. Sarte
Working Paper 04-9
Released: December 2004

Whether or not inventories can be used to break the link between production and sales is crucial for understanding firms’ employment response to productivity shocks. In a Taylor-type sticky-price model with inventories, we show that the employment...

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The Effects of Technical Change on Labor Market Inequalities
By Andreas Hornstein, Per Krusell & Giovanni L. Violante
Working Paper 04-8
Released: December 2004

In this chapter we inspect economic mechanisms through which technological progress shapes the degree of inequality among workers in the labor market. A key focus is on the rise of U.S. wage inequality over the past 30 years. However, we also pay...

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Should Optimal Discretionary Monetary Policy Look at Money?
By Andreas Hornstein & Michael Dotsey
Working Paper 02-4
Released: November 2002

This paper examines whether monetary indicators are useful in implementing optimal discretionary monetary policy when the policy maker has incomplete information about the environment. We find that money does not contain useful information for the ...

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Vintage Capital as an Origin of Inequalities
By Andreas Hornstein, Per Krusell & Giovanni L. Violante
Working Paper 02-2
Released: August 2002

Does capital-embodied technological change play an important role in shaping labor market inequalities? This paper addresses the question in a model with vintage capital and search/matching frictions where costly capital investment leads to large...

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The Role of Real Wages, Productivity, and Fiscal Policy in Germany’s Great Depression 1928-37
By Jonas D.M. Fisher & Andreas Hornstein
Working Paper 01-7
Released: August 2001

We study the behavior of output, employment, consumption, and investment in Germany during the Great Depression of 1928-37. In this time period, real wages were countercyclical, and productivity and fiscal policy was procyclical. We use the ...

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Sticky Prices and Inventories: Production Smoothing Reconsidered
By Andreas Hornstein & Pierre-Daniel G. Sarte
Working Paper 01-6
Released: March 2001

We study the implications of nominal price rigidities in a model where firms use inventories to smooth production because of increasing marginal cost. Conventional criticisms of production smoothing models have focused on their inability to replicate the...

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What is the real story for interest rate volatility?
By Andreas Hornstein & Harald Uhlig
Working Paper 99-9
Released: October 1999

What is the source of interest rate volatility? Why do low interest rates preceed business cycle booms? Most observers tend to assume that monetary policy is largely responsible for it. Indeed, a standard real business cycle model delivers rather small...

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Staggered Prices and Inventories: Production Smoothing Reconsidered
By Andreas Hornstein & Pierre-Daniel G. Sarte
Working Paper 98-8
Released: December 1998

Staggered nominal price setting introduces predictable sales variations at the firm level. We study the implications of staggered prices in a framework where, because of increasing marginal cost, firms use inventories to smooth production and thereby...

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Can a Matching Model Explain the Long-Run Increase in Canada's Unemployment Rate?
By Andreas Hornstein & Mingwei Yuan
Working Paper 98-2
Released: March 1998

We construct a simple general equilibrium model of unemployment and calibrate it to the Canadian economy. Job creation and destruction are endogenous. In this model, we consider several potential factors which could contribute to the long-run increase in...

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External vs. Internal Learning-by-Doing in an R&D Based Growth Model
By Andreas Hornstein & Dan Peled
Working Paper 98-1
Released: March 1998

In an economy where growth is determined by the interaction of R&D and learning-by-doing (LBD), changes of factors that stimulate either one of these activities affect growth differently than in an economy where growth is determinded by either ...

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'(S,s) Inventory Policies in General Equilibrium
By Jonas D.M. Fisher & Andreas Hornstein
Working Paper 97-7
Released: May 1997

We study the aggregate implications of (S,s) inventory policies in a dynamic general equilibrium model with aggregate uncertainty. Firms in the model's retail sector face idiosyncratic demand risk, and (S,s) inventory policies are optimal because of ...

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Intermediate Inputs and Sectoral Comovement in the Business Cycle
By Andreas Hornstein & Jack Praschnik
Working Paper 97-6
Released: May 1997

The postwar U.S. business cycle is characterized by positive comovement of employment and output across sectors. It has been argued that multi-sector growth models are inconsistent with this observation when changes in relative productivities are the ...

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